Kennametal : Fiscal Year 2021

2 0 2 1 A N N U A L R E P O R T

A TRANSFORMATIONAL YEAR

CORPORATE

LEADERSHIP

Damon J. Audia

Vice President and

Chief Financial Offi cer

Judith L. Bacchus

Vice President and

Chief Administrative Offi cer

Franklin Cardenas

Vice President, Kennametal Inc.

and President, Infrastructure Segment

Sanjay Chowbey

Vice President, Kennametal Inc.

and President, Metal Cutting Segment

Michelle R. Keating

Vice President, Secretary

and General Counsel

Dr. Carlonda R. Reilly

Vice President and

Chief Technology Offi cer

Christopher Rossi

President and

Chief Executive Offi cer

FINANCIAL HIGHLIGHTS

SALES

in Billions	2021	2020	2019
	$1.841	$1.885	$2.375

SALES BY REGION (2021)

n Americas	45%
n EMEA	31%
n Asia Pacifi c	24%

SALES BY	n General Engineering	47%
END MARKET	n Transportation	19%
(2021)
n Energy	15%
	n Earthworks	14%
	n Aerospace	5%

ADJUSTED	2021	2020	2019
OPERATING INCOME	$143	$141	$346
in Millions

ADJUSTED EBITDA	2021	2020	2019
in Millions	$276	$271	$465

ADJUSTED EPS	2021	2020	2019
in Dollars	$1.04	$0.94	$3.02

Forward-Looking Statements Certain statements in this report relate to future events and expectations and, as such, constitute forward-looking statements. Forward-looking statements may also include words such as "anticipates," "believes," "estimates," "expects," "hopes," "targets," "should," "will," "will likely result," "forecast," "outlook," "projects" or similar expressions. Forward- looking statements involve known and unknown risks, uncertainties and other factors that may cause the actual results, performance or achievements of Kennametal to be different from those expressed in or implied by the forward-looking statements. For further discussion of forward-looking statements, including some of the specifi c factors that may cause such a difference, see the forward- looking statements and risk factors disclosure included in our 2021 annual report on Form 10-K. Kennametal disclaims any intention or obligation to update or revise any forward-looking statements.

Non-GAAP Financial Information. This document also includes certain non-GAAP (Generally Accepted Accounting Principles)

• nancial measures as defi ned by SEC rules. As required by Regulation G, we have provided a reconciliation of those measures to the most directly comparable GAAP measures, which is available in the section titled "2021 supplemental fi nancial data."

DEAR FELLOW SHAREHOLDERS

Fiscal 2021 was challenging as we faced off against COVID-19 and the associated end-market headwinds. Throughout the last 12 months, our team has focused on protecting employees, while continuing to serve customers, strengthening liquidity and advancing our strategic initiatives to position the company to outperform as markets recovered.

Operating in the COVID-19 Environment

Throughout fiscal 2021 we safely operated and continued to serve customers. We also aggressively managed costs to maintain strong liquidity. As a result, our financial performance was better than expected and especially impressive given the end-market headwinds we faced. While organic sales declined by 4% year-over-year, we saw improved results sequentially every quarter, benefitting from increasing sales volumes and incremental simplification/modernization savings.

Adjusted Earnings Per Share (Adjusted EPS) was $1.04, Adjusted EBITDA was $276M, and Adjusted EBITDA margin was 15%. We finished the year strong with organic sales in the fourth quarter up 29% year-over-year, and Adjusted EPS of $0.53. In addition, fourth quarter and full year free operating cash flow increased significantly year-over-year, reflecting lower net capital expenditures due to simplification/modernization initiatives and higher net income.

Advancing our Strategy

Despite the challenges of the pandemic, we continued investing in our strategic operational and commercial excellence initiatives to position the company to outperform as markets recover. I am particularly proud of what our employees have achieved on the multi-year simplification/modernization program. With the incremental $85M in savings realized in fiscal 2021, the total savings from the program since inception is $186M, which is within the target

range on significantly lower volumes. The benefits of the program were evident in the strong operating leverage we delivered in the fourth quarter of fiscal 2021, despite the return of temporary cost actions taken in the prior year. We are confident in realizing additional benefits from the program as we drive more volume through our modernized factory footprint.

I am also pleased with the progress we made advancing commercial excellence. We combined the former Industrial and WIDIA businesses into one Metal Cutting segment to more effectively direct our commercial resources, technical expertise and products toward capturing a larger share-of-wallet. This move allowed us to expand into an additional multi-billion dollar market segment of metal cutting requiring fit-for-purpose tooling, representing a 40 percent increase in addressable market. We have also progressed our growth initiatives mainly targeting the key end markets of general engineering and aerospace.

Our Infrastructure segment focused on extending its global reach to bring the full portfolio of products to customers beyond the U.S. with particular focus on EMEA and Asia Pacific. In addition, we saw early success from expansion into mining adjacencies, including wear solutions for gold and copper mining as well as consumable tools and wear solutions for surface mining.

In the pages that follow you will also read about how our innovation is helping customers transform everyday life, from exploration on Mars and high-performance metal powders for 3D printing, to using our expertise in the transportation market to help automotive manufacturers meet growing demand for electric vehicles.

This year also marks our second Environmental, Social and Governance (ESG) report, which you will find on the corporate sustainability page of our website. In it, we talk about the progress we have made and where we are planning to focus in the years ahead.

Finally, it is a testament to the dedication and expertise of our employees that we were able to safely serve customers and advance our strategy in fiscal 2021 as we continued to transform the company. I am excited to leverage the work we have done in recent years to demonstrate in fiscal 2022, and beyond, our improved growth and financial performance throughout the economic cycle.

As always, thank you for your continued support as a Kennametal investor.

Sincerely,

Christopher Rossi

President and Chief Executive Officer

Kennametal 2021 Annual Report 1

A Transformational Year

Focused execution providing long-term benefi ts.

Operational Excellence

Simplification/Modernization is transforming our operations. Over the past several years we've invested in technology, equipment and people to build our capabilities, better serve our customers, compete and grow.

Delivering Results

• $300 million in incremental capital expenditures complete
• Delivering our footprint rationalization target of 6 facilities
• Product portfolio simplification which reduced complexity of our material solutions offering by 60%
• $186 million in total savings achieved, in line with the target we set in December 2017

Automated transfer of parts allows for one operator to service and support multiple machines improving quality and efficiency.

Commercial Excellence

This fiscal year we combined our Industrial and WIDIA business segments into one Metal Cutting segment and repositioned our brands to target fit-for-purpose application needs, increasing our total addressable market by ~40%.

New structure and brand strategy target larger share-of-wallet

We moved from...

separate Industrial and WIDIA organizations with limited interaction and brand differentiation

To a...

single source Metal Cutting segment for improved strategic focus and utilization of resources, and shifted WIDIA to fi t-for-purpose to maximize customer share-of-wallet

Applies across all end markets

Performance Tools + Engineering Support	Fit-for-Purpose Tools	Low-Cost Tools
		Note: KMT does not
Industrial Portfolio		participate in this segment

PRIOR

Portfolio

NEW	Portfolio					Portfolio
		Fit-for-purpose is readily	40%* increase
		available, high-quality	in served market
		tooling that leverages the	opportunity
		modernized footprint

*based on third party research and internal estimates

• Kennametal 2021 Annual Report

Transforming Everyday Life

Our customers build things that touch our everyday lives…

and their products are made possible by Kennametal innovation.

From Earth to Mars

When NASA's Perseverance rover landed on Mars earlier this year, it brought Kennametal materials and manufacturing innovation with it. Millions of miles away, our tungsten carbide material is still hard at work, helping scientists drill and explore the landscape of Mars.

The Perseverance rover is equipped with a drill for coring samples from Martian rocks and soil to be analyzed for signs of past microbial life. The drill bit is equipped with tips ground from blanks of Kennametal's proprietary K92 grade tungsten carbide-a material twice as strong as steel and manufactured in our Victoria, British Columbia facility.

Our journey from Earth to Mars began in 2014 when NASA's Jet Propulsion Laboratory (JPL), a longtime customer of our metal cutting tools, turned to us for a high-strength drilling solution. We knew our materials could stand up to the toughest jobs here on Earth, like oil and gas drilling and hard rock mining, and we were confident it could get the job done on Mars.

NASA's JPL, which finishes our blanks to its final specifications for the drill bit, placed a series of orders that initially supported various testing phases of the rover development and finally the long-awaited mission itself.

We are proud to be on Mars with our customer-living out our vision of transforming how everyday life is built-by continuing to advance the materials and manufacturing expertise that solves the world's toughest challenges and makes progress possible.

Imagine a piece of metal about the size of a Tic Tac with the power to help change how we, and generations to come, think about the universe.

Building the Future of Transportation

Enabling Electric Motor Manufacturing

As automotive manufacturers commit to expanding their offerings of hybrid and electric vehicles, Kennametal is leveraging our deep transportation market knowledge to help our customers. The design flexibility of additive manufacturing can help customers meet growing demand for lighter weight tooling solutions needed to machine components for these vehicles. When combined with the proven hole finishing technology of our RIQ inserts for indexable reamers, our innovative 3D printed toolholders enable our automotive customers to achieve unmatched productivity and reliability in electric motor manufacturing.

Visit our FY21 Environmental, Social and Governance (ESG) Report on the Corporate Sustainability page of our website at www.kennametal.com to see our mission, vision and values in action.

Kennametal 2021 Annual Report 3